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PayPal’s Push Into Stablecoins Could Increase Profitability, Says Tether Co-Founder

PayPal’s Push Into Stablecoins Could Increase Profitability, Says Tether Co-Founder

PayPal’s stablecoin launch raises doubts about its innovation, with concerns it aims to boost profits by eliminating intermediaries, while its PYUSD currently lags in adoption compared to other stablecoins.

Highlighting Points

  • PayPal’s stablecoin, PYUSD, has sparked skepticism, particularly from Tether’s co-founder, William Quigly.
  • With a market cap of $43.4 million, PYUSD is lagging significantly behind other stablecoins like USDT and USDC in adoption.
  • Despite being listed on major exchanges, PYUSD’s daily trade volumes are volatile and relatively low.
  • Experts believe that increased user familiarity could bolster PYUSD’s market position in the future.

PayPal’s launch of its stablecoin has sparked skepticism and doubt regarding the project’s potential for innovation. William Quigly, co-founder of Tether, believes that PayPal’s decision to enter the stablecoin market is primarily driven by the desire to increase profitability. He stated in an interview with Coindesk that he does not expect significant innovation from PayPal’s stablecoin and suggests that it will be similar to other stablecoins in the market.

According to Quigly, PayPal’s move towards stablecoins allows the company to eliminate the need for financial intermediaries, potentially resulting in substantial savings on foreign exchange fees. With all transactions settled on PayPal’s private blockchain, Quigly posits that the payment service has two options: either lower the cost of cross-border transactions for its users or keep the savings as profit by continuing to charge currency conversion fees.

While it remains unclear which route PayPal will choose, Quigly shared Tether’s early years as an example. He mentioned that Tether initially started as a “charitable contribution” to the virtual currency space, supporting the open-source community’s requirements. Quigly also highlighted that Tether’s earnings came from interest rates on its reserves. In Q2, the stablecoin issuer generated over $1 billion in operational profit.

PYUSD Fails to Gain Widespread Adoption

Currently, PayPal’s stablecoin, PYUSD, has a market capitalization of $43.4 million, significantly lower than Tether’s USDT and USDC. On-chain analysis indicates low adoption of PYUSD, citing factors such as the project’s novelty for its low transaction volumes. Dessislava Aubert, an analyst at Kaiko, noted that PYUSD’s daily trade volumes have been volatile and relatively low compared to other stablecoins despite being listed on Coinbase and Kraken at the end of August.

Data from CoinGecko shows that PYUSD’s daily trading volume reached $1.2 million, while USDT achieved over $13 billion.

However, experts believe that once PayPal’s user base of 435 million individuals warms up to its stablecoin, PYUSD could potentially capture a significant portion of the market share currently held by USDT and USDC.

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